Author: Instituto Dannemann Siemsen

The aim of the Institute is to foster educational and cultural activities within the areas of industrial and intellectual property, copyright, consumer rights, environmental rights, competition, franchises and related areas, without any profitable purpose.

This article has been written by Natália Barzilai and Gisela de Lamare de Paiva Coelho

As a result of the massive backlog of two hundred and forty-four thousand patents applications as of May, 2017, the Brazilian Patent and Trademark Office (BPTO) has been studying multiple measures to continually reduce the already famous tardiness of its examinations. The BPTO has come up with some controversial ideas.

Successfully, the BPTO has created categories in order to speed up its process, the first one being the “Green Patents”, reducing by 90% the processing time regarding the analysis of environment related innovations. After such a positive outcome, in June, 22, the BPTO extended this project to innovations from the Science and Technology Institutions (STI). Although it is still a temporary strategy limited to a certain number of “STI Patent” applications, the BPTO seeks to reduce from the average time from 10,8 years to 10 months as it is already the case with “Green Patents”.

Another conservative approach to reduce the backlog created by the reduce number of technical examiners, is to join forces with ANVISA (Brazilian Health Agency). As required by the Brazilian IP Law, the BPTO must send all pharmaceutical patents to the Health Agency to be analyzed and check out if there is no forbidden substance in it. Only after obtaining prior approval the BPTO’s technical exam can start. Having such a relevant role in the process of the analysis, the BPTO has proposed ANVISA to send its examiners to the BPTO facilities. Such small measure can help optimize the proceedings not only because the BPTO has an automatic system but because it also prevents losing time between Agencies’ transfers. In addition, the BPTO and ANVISA have established two guidelines in 2017 to fasten ANVISA’s analysis. Now granting of prior approval is based only on the presence of forbidden substance – not on the patentability of the innovation as it used to be. These guidelines not only shorten the analysis period but also provide more legal security as the Health Agency is obliged to grant the approval based only in public health requirement.

Besides those measures, facing the original source of the backlog, the BPTO is studying the possibility of implementing the successful method applied by the Japan Patent Office (JPO). As presented by Takuya Yasui in December, 2017, Japan successfully tackled its backlog by adopting two measures. First, by sub-contracting all preliminary activities, such as research before technical decisions. Today JPO has 10 companies providing its research and, even though they are private companies, supervisors are often retired JPO’s examiners. Second, hiring temporary examiners for 5-year periods which can be renewed for 5 more. With such changes, the time until the exam was reduced from 2,4 years in 2008 to 10,4 months in 2014.

Regarding the most controversial proposals, the BPTO has issued Resolution nº 193 seeking to expedite the examination of Brazilian patent applications under the PCT. In this Resolution, the BPTO has regulated that it will not perform a search of its own and will only incorporate the search already performed by an “office of reference”, meaning, International Searching Authorities (ISA) and International Preliminary Examining Authorities (IPEA).

The BPTO also started a public consultation for a proposal establishing that patent applications filed or with the national phase initiated up to the date of publication of the future regulation, will be granted 90 days, following a notice of admissibility, to decide whether they want to opt or not for a simplified patent application procedure, provided that they meet certain requirements and are not the subject of third-party observations (also called pre-grant oppositions). Patent applications for pharmaceutical products and processes are, in principle, excluded from this simplified procedure, potentially for political reasons and because of the scrutiny of ANVISA regarding these patents.

As reported in a previous publication at Dannemann Siemsen News[1], according to the proposed simplified procedure, the patent applications to which it applies will be automatically allowed without substantive examination, provided that a few requirements are met:

The filing of the patent application or request for entry into the national phase (in the case of PCT applications) should have occurred before the publication date of the proposed regulation;

The application has been published or the early publication requested up to thirty days from the date of publication of the future regulation;

Examination of the patent application should have been requested within 30 days following the publication date of the future regulation;

Annuities payments must be in order; and

No official actions regarding patentability have been published.

Our general advice would be to remove patent applications related to important inventions from the simplified procedure due to the following reasons: (i) the future patents are more likely to face validity challenges; (ii) BPTO’s delay would be compensated somehow since our IP Law currently guarantees a minimum of 10-year patent term from granting date; and (iii) it is possible to put an application to a fast-track examination in case of unauthorized exploitation or through a writ of mandamus.

In particular applicants having a large number of pending patent applications in Brazil should begin to chart a strategy in relation to their portfolio in view of possible new regulations. Meanwhile, we are hoping for the best.

In the world of mobile phones, there are technological standards that allow devices from different companies to talk to each other. Technically speaking, it is the interoperability between mobile phones. So when a company holds a patent to an invention that is part of standard technology, it has the option to declare it as essential to the standard. The other option is to keep the invention nonstandard and unique to only their mobile phones. However, what happens in practice is that most of these innovations end up being standardized.

For the essential patents not to become obstacles to this technology dissemination, international courts have developed rules limiting royalties to the terms considered fair, reasonable and non-discriminatory – the term FRAND – considering that these technologies, because they are standardized, should be used by everyone. The exception to this rule would be in the unlikely event of a company refuses to pay these reasonable royalties, in which case the patent holder could promote inhibitory actions. In Brazil, there was a recent case in which both Brazilian and North American justices applied these international rules to suspend a number of lawsuits brought by a famous Swedish company against a Chinese company.

What happened was that these companies were negotiating a global license for declared essential patents, and have also initiated arbitration proceedings in France and a lawsuit in the United States, with the specific purpose of fixing reasonable royalties for the use of standardized technologies, when the Swedish company, the patent holder, without waiting for the definition of the subject, proceeded to file a series of inhibitory actions against the Chinese company in several countries, including Brazil.

Making use of preliminary injunctions, the European company began to coerce the Asian company compromise in these international negotiations, while threatening to remove the Chinese company from the market. In Brazil, four inhibitory actions were filed.

In the four actions, injunctions have been granted ordering the Chinese company to cease commercialization and to withdrawal its mobile phones from the Brazilian market. The argument made by the Swedish company was simple: If the patented technology was standardized and essential for cell phones, it was obviously present in the devices of the Chinese company, meaning that, logically, these devices violated the patents of the Swedish group. However, the commitment to license these patents to all interested parties, assumed internationally by the Swedish company, when it chose to declare that their technology should be standardized, was never mentioned. Thus, initially the judges considered that this was a simple matter of patent infringement, when in fact, the question was more complex, in that the Swedish group on the one hand, had declared their technologies to being essential for the standard, pledging not to take injunctions against third parties, without first negotiating a license for the exploration of these key technologies, but on the other hand, ignored this commitment and filed court actions against the Chinese company without any royalties negotiation proposal, in Brazil.

After more than two years, the Brazilian courts, which originally had granted injunctions understanding that patent infringement would be obvious because it is a standardized technology, reviewed the issue in light of international rules and correctly changed their understanding.

Once the Courts understood the background of these actions was a global negotiation for reasonable royalties, and that the Swedish Company had opted to include its technologies in the international standard, it could not now refuse to license them under FRAND terms, and even worse take discriminatory action against one company before concluding the reasonable royalties negotiation, the 2nd Corporate Court of Rio de Janeiro revoked the previous injunctions and kept the cell phones in Brazil.

Following this same line, the US court went further and ordered the companies to interrupt any measure involving these essential patents, not only in America, but in all other countries, including Brazil, until that US court set what are the reasonable royalties to these patents.

Common sense prevailed, both in Brazilian Court and in the US Court, to the extent that if the Swedish company decided to standardize its technology, committing to license it globally on fair, reasonable and non-discriminatory terms, it cannot be accepted that they would take inhibitory measures while still discussing reasonable royalties for a global license.

This post was written by Eduardo da Gama Camara Junior and Rodrigo de Assis Torres.

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